Six new requirements have been added for internal claims procedures and appeals, including a 24-hour notice requirement for benefit determinations, according to new interim final rules issued jointly by the Internal Revenue Service, the Department of Labor’s Employee Benefits Security Administration (EBSA), and the Department of Health and Human Services’ Office of Consumer Information and Insurance Oversight (OCIIO).
The rules implement the internal claims appeals and external review requirements in Public Health Service Act Sec. 2719, as added by the Patient Protection and Affordable Care Act (P.L. 111-148). The rules were published in the July 23 Federal Register.
Internal Claims Appeal
The interim final regulations set forth six new requirements in addition to those in the existing DOL claims procedure regulation to implement an effective internal claims and appeals process.
Adverse Benefit Determination. First, the definition of an adverse benefit determination is broader than the definition in the DOL claims procedure regulation, in that an adverse benefit determination for purposes of these interim final regulations also includes a rescission of coverage.
An adverse benefit determination eligible for internal claims and appeals processes under these regulations includes a denial of, reduction of, termination of, or failure to provide or make a payment for a benefit, including the following:
A determination of an individual’s eligibility to participate in a plan or health insurance coverage;
A determination that a benefit is not a covered benefit;
The imposition of a preexisting condition exclusion, source-of-injury exclusion, network exclusion, or other limitation on otherwise covered benefits; or
A determination that a benefit is experimental, investigational, or not medically necessary or appropriate.
24-Hour Notice. Second, for urgent care claims (as defined in existing DOL claims procedure regulations), the regulations provide that a plan must notify a claimant of a benefit determination (whether adverse or not) as soon as possible, but not later than 24 hours after the receipt of the claim by the plan or health insurance coverage, unless the claimant fails to provide sufficient information to determine whether benefits are covered or payable.
The current requirements of the DOL claims procedure regulation generally requires a determination not later than 72 hours after receipt of the claim by a group health plan for urgent care claims.
Review. Third, the regulations provide additional criteria to ensure that a claimant receives a full and fair review. In addition to complying with the requirements of the existing DOL claims procedure regulation, a plan must provide the claimant, free of charge, with any new or additional evidence considered by the plan in connection with the claim.Such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided to give the claimant a reasonable opportunity to respond. Also, before the plan can issue an adverse benefit determination based on a new or additional rationale, the claimant must be provided, free of charge, with the rationale. The rationale also must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required.
Conflict Of Interest. Fourth, new criteria are provided with respect to avoiding conflicts of interest. The plan or issuer must ensure that all claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Thus, decisions regarding hiring, compensation, termination, promotion, or other similar matters must not be made based upon the likelihood that the individual will support a denial of benefits. For example, a plan or issuer cannot provide bonuses based on the number of denials made by a claims adjudicator. Similarly, a plan or issuer cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases, rather than based on the expert’s professional qualifications.
“Culturally Appropriate.”Fifth, the statute and the regulations require a plan to provide a notice to enrollees “in a culturally and linguistically appropriate manner.” This provision applies to internal and external claims appeals processes. Plans and issuers are considered to provide relevant notices in a culturally and linguistically appropriate manner if notices are provided in a non-English language based on thresholds of the number of people who are literate in the same non-English language.
In the group market, the threshold differs depending on the number of participants in the plan. For a plan that covers fewer than 100 participants, the threshold is 25% of participants being literate only in the same non-English language. For a plan that covers 100 or more participants at the beginning of a plan year, the threshold is the lesser of 500 participants, or 10% of all plan participants.
In addition, a plan must ensure that any notice of adverse benefit determination or final internal adverse benefit determination includes information sufficient to identify the claim involved. This includes the date of service, the health care provider, and the claim amount (if applicable), as well as the diagnosis code, the treatment code, and the corresponding meanings of these codes.
Additionally, the plan or issuer must provide a description of available internal appeals and external review processes, including information regarding how to initiate an appeal. Finally, the plan or issuer must disclose the availability of, and contact information for, any applicable office of health insurance consumer assistance or ombudsman to assist enrollees with the internal claims and appeals and external review processes. Model notices that can be used to satisfy all the notice requirements under these interim final regulations will be made available in the future at http://www.dol.gov/ebsaand http://www.hhs.gov/ociio/.
Failure To Comply. Sixth, if a plan fails to strictly adhere to all the requirements of the internal claims and appeals process, and the claimant “is deemed to have exhausted the internal claims and appeals process, regardless of whether the plan or issuer asserts that it substantially complied with these requirements or that any error it committed was de minimis.” Upon such a such a failure, the claimant may initiate an external review and pursue any available remedies under applicable law, such as judicial review.
External Review
The statute and the regulations provide that plans must comply with either a state external review process or the federal external review process. The regulations provide a basis for determining when plans must comply with a state external review process and when they must comply with the federal external review process.
For health insurance coverage, if a state external review process includes, at a minimum, the consumer protections in the NAIC Uniform Model Act in place on July 23, 2010,then the issuer must comply with the applicable state external review process and not with the federal external review process. In such a case, to the extent that benefits under a group health plan are provided through health insurance coverage, the issuer is required to satisfy the obligation to provide an external review process, so the plan itself is not required to comply with either the state external review process or the federal external review process. According to the preamble to the regulations, “The Departments encourage states to establish external review processes that meet the minimum consumer protections of the NAIC Uniform Model Act. The Departments prefer having states take the lead role in regulating health insurance issuers, with federal enforcement only as a fallback measure.”
These interim final regulations do not preclude a state external review process from applying to and being binding on a self-insured group health plan under some circumstances.
While the preemption provisions of ERISA ordinarily would prevent a state external review process from applying directly to an ERISA plan, ERISA preemption does not prevent a state external review process from applying to some self-insured plans, such as nonfederal governmental plans and church plans not covered by ERISA preemption, and multiple employer welfare arrangements, which can be subject to both ERISA and state insurance laws. A state external review process could apply to such plans if the process includes, at a minimum, the consumer protections in the NAIC Uniform Model Act.
Any plan not subject to a state external review process must comply with the federal external review process.
These regulations set forth the standards that would apply to claimants, plans, and issuers under this federal external review process, and the substantive standards that would be applied under this process, which are similar to a state external review process. They also provide that the federal external review process, like the state external review process, will provide for expedited external review and additional consumer protections with respect to external review for claims involving experimental or investigational treatment.
These requirements do not apply to grandfathered health plans. How non-grandfathered self-insured group health plans may comply or be brought into compliance with the requirements of the new federal external review process will be addressed in future “sub-regulatory guidance.”
State Minimums
For a state external review to apply instead of the federal process, the state external review process must include the following elements from the NAIC Uniform Model Act:
Provide for the external review of adverse benefit determinations that are based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.
Require issuers to provide effective written notice to claimants of their rights.
Make exhaustion of internal review unnecessary if: the issuer has waived the exhaustion requirement, the claimant has exhausted the internal claims and appeals process under applicable law, or the claimant has applied for expedited external review.
Provide that the issuer must pay the cost of an independent review organization (IRO) for conducting the external review.
Not impose a restriction on the minimum dollar amount of a claim for it to be eligible for external review (for example, a $500 minimum claims threshold).
Allow at least four months after the receipt of a notice of an adverse benefit determination or final internal adverse benefit determination for a request for an external review to be filed.
Provide that an independent review organization will be assigned on a random basis or another method of assignment that assures the independence and impartiality of the assignment process.
Provide for maintenance of a list of approved independent review organizations qualified to conduct the review based on the nature of the health care service that is the subject of the review.
Provide that any approved IRO has no conflicts of interest that will influence its independence.
Allow the claimant to submit to the IRO in writing additional information that the IRO must consider when conducting the external review and require that the claimant is notified of such right to do so.
Provide that the decision is binding on the plan or issuer, as well as the claimant, except to the extent that other remedies are available under state or federal law.
Provide that, for standard external review, within no more than 45 days after the receipt of the request for external review by the IRO, the IRO must provide written notice to the issuer and the claimant of its decision to uphold or reverse the adverse benefit determination.
Provide for an expedited external review in certain circumstances and, in such cases, the state process must provide notice of the decision as expeditiously as possible, but not later than 72 hours after the receipt of the request.
Require that issuers include a description of the external review process in the summary plan description, policy, certificate, membership booklet, outline of coverage, or other evidence of coverage it provides to claimants..
Follow procedures for external review of adverse benefit determinations involving experimental or investigational treatment, substantially similar to what is set forth in the NAIC Uniform Model Act.
The interim final regulations are effective Sept. 21, 2010. However, the rules generally apply to group health plans and group health insurance issuers for plan years beginning on or after Sept. 23, 2010.
Note: If final rules are not issued within three years, the IRS version of these interim regulations expires (IRC Sec. 7805(e)). The DOL and OCIIO versions have no expiration date.
Comments on the interim rules, which must be received by Sept. 23, 2010, may be submitted through the federal eRulemaking Portal at http://www.regulations.gov. Comments to EBSA should be identified by RIN 1210- AB45; comments to HHS should refer to file code OCIIO-9993-IFC; and comments to the IRS should be identified by REG-125592-10.
For more information, contact the following: Amy Turner or Beth Baum, EBSA, (202) 693-8335; Karen Levin, IRS, (202) 622-6080; or Jim Mayhew, OCIIO, (410) 786-1565.
For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.
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